Ways to Measure the Size of a Business
Ways to Measure the Size of a Business
1. Number of People Employed
Easy to measure and compare across businesses.
Limitations:
Some businesses are capital-intensive, using machines instead of many workers → high output but few employees.
Part-time workers create confusion: two part-timers = one full-timer or two employees?
2. Value of Output
Common in manufacturing industries where output can be measured.
Limitations:
High output value doesn’t always mean large business.
A small firm making few expensive products may show high output.
Output value ≠ sales value if some goods remain unsold.
3. Value of Sales
Used mostly for retail businesses, especially those selling similar products.
Limitations:
Misleading when businesses sell very different products(e.g., sweets stall vs luxury perfume shop).
4. Value of Capital Employed
Total value of capital invested in the business.
Limitations:
Labour-intensive firms may use very little capital even if they employ many workers.
High labour, low capital → doesn’t look big using this measure.